Deloitte Alert on credit market turmoil

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07 Oct 2008

Deloitte (United States) has published a Financial Reporting Alert on Potential Counterparty Default and Other Accounting Considerations Related to the Credit-Market Turmoil.

Deloitte Financial Reporting Alert 08-14 (PDF 70k) addresses the impact that recent market events, such as the bankruptcy of Lehman Brothers Holdings Inc. and the credit-standing deterioration of other financial institutions, may have on an entity's financial statements. This alert focuses on the following:
  • The impact of possible counterparty default on an entity's derivative contracts that are (1) designated as hedging instruments in cash flow or fair value hedging relationships and/or (2) accounted for under the normal purchases and normal sales exception criteria defined in Statement 133,1 as amended.
  • Other accounting considerations associated with counterparty default (or potential default), highlighted in Appendix A of the Alert.
  • Other accounting considerations arising from the current turmoil in the credit markets, highlighted in Appendix B of the Alert.
Although this Alert highlights a number of items preparers and auditors should consider, it is neither a comprehensive checklist nor a complete analysis. Organizations should consider their own facts and circumstances and monitor ongoing developments to determine the impact of market conditions on their financial statements. Consultation with independent accountants also may be advisable in certain circumstances.


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